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ECB holds line on rates
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July 20, 2000: 8:00 a.m. ET
Central bank keeps rates at 4.25% but economists see a rate hike on horizon
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LONDON (CNNfn) - The European Central Bank held the line on interest rates Thursday, as expected by economists, although many experts say a rise is likely in the next few months as money supply growth continues and inflation in the 11-nation euro zone continues to face upward pressure.
The ECB maintained at 4.25 percent its minimum bidding rate for weekly refinancing agreements. Most economists expected no rate increase following the ECB's unexpectedly large half-point hike at its June 8 meeting, which it hoped would cool off an increasingly hot European economy and forestall a further rise in inflation.
The euro trickled lower against the dollar shortly after the announcement, trading at 92.01 U.S. cents, compared to 92.34 U.S. cents in late New York trading Wednesday.
The decision comes in the wake of a report Tuesday showing euro-zone inflation climbed to 2.4 percent in June, the highest level since the euro currency was launched in early 1999 and topping the ECB goal to keep inflation in the region below 2 percent. Inflation was 1.9 percent in May.
However, the numbers were skewed largely as a result of the recent rise in volatile oil prices.
Holger Schmieding, an economist with Merrill Lynch, said rising credit demands in Europe as a result of higher economic growth rates is likely to force ECB officials to raise rates soon. Money supply growth is running near six percent, when the ECB target is about 4.5 percent.
"Buoyant money supply, well above the ECB reference value of 4-1/2 percent, will probably be one further argument to expect a ECB rate hike of 50-basis points on the 14th of September," he told CNNfn on Wednesday. 
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European Central Bank
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